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National Bank of Hungary

National Bank of Hungary

October 24, 2017

Hungarian monetary policymakers left their base rate at 0.90% at the latest review. It’s been at that level since the last of 3 reductions in 2016, each by 15 basis points. The base rate had also been cut five times by 15 bps each during 2015 and is currently 610 basis points lower than in August 2012 before the start of the easing cycle. The central bank’s overnight deposit rate, which had been reduced 10 basis points at the September meeting, was left unchanged this time at 0.15%, but a released statement today reaffirmed that the policy bias remains toward ease.

In the Council’s assessment, maintaining the base rate and loose monetary conditions for an extended period are necessary to achieve the inflation target in a sustainable manner. However, the September Inflation Report indicated downside risks to inflation. The Council judges that the likelihood of these materialising has increased recently. It is important for the Council to ensure that the low interest rate environment exerts its favourable effect as long as possible. To achieve this, it is necessary to reduce long-term yields and as a result the steepness of the yield curve, which will also promote the expansion of loans with long interest rate fixation. The Council will stand ready to ease monetary conditions further and is considering unconventional instruments to be used accordingly.